During an investors call, Asian Paints MD & CEO Amit Syngle had said GDP’s correlation with paint industry has “gone for a toss in the current year”
Asian Paints clarified that its managing director and chief executive officer Amit Syngle’s comments on the relation between gross domestic product growth and expansion of the paints industry were ‘misinterpreted after his remarks sparked a political controversy.
In an exchange filing on May 15, the company emphasized that Syngle’s comment that GDP’s correlation with the paint industry has “gone for a toss in the current year” were not meant to question the validity of GDP numbers but were in response to a specific question during a conference call with investors on May 9.
“In that context, it was mentioned that the correlation of the paint industry growth with the GDP growth is varying, and we are unable to correlate both, unlike in the past,” it added.
In the call, Syngle indicated that the correlation between the paint industry’s growth and GDP growth had become distorted recently. Historically, the paint industry has grown at 1.5 to 1.75 times the GDP growth rate, the company statement said.
“It was, hence, called out that there is a need for examining the GDP data to understand the reasons for this variance,” the company said, referring to the recent social media posts and media articles claiming that Syngle “raised doubts about the gross domestic product of India, at the investor conference”.
His comments fuelled a political controversy, with the Congress party in Kerala questioning the authenticity of India’s GDP growth based on Syngle’s observations.
What Syngle said
During the investor call, Macquarie analyst Avi Mehta noted that the relationship between paints industry growth and GDP growth “seems to have fallen out of place” and if Syngle could explain the reasons behind that.
To this, Syngle responded that the analyst is correct and he is unsure how the GDP is being calculated. “See, first of all, you are very correct… the GDP correlation is something that has really gone for a toss in the current year… I also feel that today, I’m not very sure how the GDP numbers are coming. You guys are better wizards in terms of really understanding how those numbers are coming.”
Syngle also pointed out that even in core sectors, such as steel and cement, the correlation has gone wrong. “So even if you look at the core sectors, whether it is steel, cement, nowhere it is correlating with the kind of overall GDP growth we have.”
“So, therefore, I feel that there is something which we need to kind of look at from a nominalization of this GDP growth which is happening to find out more realistically that if we are talking of a 7% growth, whether that 7 percent really translates to a real time of 5 percent or 4 percent GDP for a certain sector,” he added.
The MD also said the company is trying to find out what the ‘real GDP’ is and how it differs from region to region. “…The correct GDP in terms of what would really be applied to a certain sector is something which I think we need to find out because the GDP is also varying from region to region.”
So, I think maybe some more work needs to happen in terms of really dissecting that, Syngle said.
